Beige Book: Economic Activity Steady

The Federal Reserve released its latest Beige Book Wednesday, saying overall US economic activity was relatively unchanged since the previous report.

The Beige Book is a monthly synopsis of the US’s economic activity as summarized from reports from the Federal Reserve Bank directors.

 

OVERAL ECONOMIC ACTIVITY

 

Five districts reported slight or modest increases in overall activity, six noted no change or slight declines, and one cited a significant decline, the report said.  On balance, contacts generally expected little growth in the months ahead.

Consumer spending increased slightly, with some retailers reporting more robust sales over the holidays, the report said.  Other retailers said high inflation continued to reduce consumers’ purchasing power, particularly among low- and moderate-income households.

Auto sales were flat on average, but some dealers said increased vehicle availability had boosted sales, the report said.

Tourism contacts reported moderate to robust activity augmented by strong holiday travel, the report said.  Manufacturers said activity declined modestly on average, and, many districts reported that supply chain disruptions had eased.

Housing markets continued to weaken, with sales and construction declining across Districts, the report said.  Commercial real estate activity slowed slightly, on average, with more notable weakening in the office market.

Nonfinancial services firms experienced stable demand on balance, the report said.  Most bankers reported that residential mortgage demand remained weak, and some said higher borrowing costs had begun to dampen commercial lending.

Energy activity continued to increase moderately, and agriculture conditions generally were unchanged or improving.

 

LABOR MARKETS

 

Employment continued to grow at a modest to moderate pace for most districts, the report said.  Only one district reported a slight decline in employment, and one other reported no change in employment levels.

While some districts said labor availability had increased, firms continued to report difficulty filling open positions, the report said.  Many firms hesitated to lay off employees even as demand for their goods and services slowed and planned to reduce headcount through attrition if needed.

With persistently tight labor markets, wage pressures remained elevated across districts, though five reserve banks reported these pressures had eased somewhat, the report said.  Some employers said they had continued to offer bonuses and enhanced benefits to attract and retain employees.

 

PRICES

 

Selling prices increased at a modest or moderate pace in most districts, though many said the pace of increases had slowed, the report said.  Manufacturers in many districts reported continued easing in freight costs and prices for commodities, including steel and lumber, though some said input costs remained elevated.

Many retailers reported increased difficulty passing through cost increases, suggesting greater price sensitivity on the part of consumers. In addition, some retailers offered more discounts and promotions.

 

CATTLE, BEEF RECAP

 

The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $156.19 to $158.39 per cwt, compared with last week’s range of $156.92 to $158.85.  FOB dressed steers, and heifers went for $246.42 to $250.96 per cwt, versus $246.75 to $251.19.

The USDA choice cutout Wednesday was down $2.58 per cwt at $274.08 while select was off $0.67 at $253.86.  The choice/select spread narrowed to $22.13 from $22.13 with 99 loads of fabricated product and 15 loads of trimmings and grinds sold into the spot market.

The USDA said basis bids for corn from feeders in the Southern Plains were down $0.10 at $1.85 to $2.00 a bushel over the Mar corn contract.  Bids in Kansas were steady at $0.85 over the Mar, which settled at $6.81 1/4 a bushel, down $0.04.

The CME Feeder Cattle Index for the seven days ended Tuesday was $179.09 per cwt down $1.96.  This compares with Wednesday’s Jan contract settlement of $179.50 per cwt, down $0.15.